Note

– Sale of

50%

Membership Interest in GB Sciences Louisiana, LLC

February 12, 2018,

the Company’s wholly-owned subsidiary, GB Sciences Louisiana, LLC (“GBSLA"), issued members’ equity interests equal to

15%

in GBSLA to Wellcana Group, LLC (“Wellcana”) for

million. Under the GBSLA operating agreement, Wellcana had an option to make additional capital contributions for the purchase of up to an additional

35%

membership interest in GBSLA, at the rate of

membership interest per

million contributed. To date, Wellcana has made additional cash contributions of

$7.0

million and its non-controlling interest in GBSLA increased to

49.99%.

The capital contributions have been used to fund the buildout of the Petroleum Drive facility and to pay for the operating costs of GBSLA.

November 15, 2019,

the Company entered into the Membership Interest Purchase Agreement ("MIPA") with Wellcana Plus, LLC ("Purchaser"), an affiliate of Wellcana Group, LLC. In consideration for the sale of its

50.01%

membership interest in GBSLA, the Company received the

$8,000,000

Promissory Note ("Wellcana Note") and

may

receive up to an additional

$8,000,000

in earn-out payments.

The Wellcana note bears interest at a rate of

per annum and payments are due beginning

June 1, 2020,

and ending

December 1, 2021.

The Company recorded a

$1,389,408

discount on the note receivable based on an imputed interest rate of

17.0%,

and the carrying amount of the note was

$6,610,592

as of

November 15, 2019:

Wellcana Note Receivable	Note Payments
June 1, 2020	$	500,000
September 1, 2020		750,000
December 1, 2020		1,000,000
March 1, 2020		1,250,000
June 1, 2021		1,500,000
September 1, 2021		1,500,000
December 1, 2021		1,500,000
TOTAL PAYMENTS		8,000,000
DISCOUNT ON NOTE RECEIVABLE		(1,389,408	)
NET PRESENT VALUE	$	6,610,592

The Company

may

also receive up to

$8,000,000

in earn-out payments under the MIPA. Earn-out payments are calculated as

25%

of the distributions made by GBSLA to Purchaser through

September 30, 2022,

and

10%

of distributions made thereafter under any extension or renewal of the relationship with LSU. The Company accounts for contingent consideration under a loss recovery approach. Under a loss recovery approach, the Company records a contingent consideration asset only to the extent of the lesser of,

) the amount that the non-contingent consideration received is exceeded by the net assets deconsolidated, or

) the amount of contingent consideration that it is probable will be received. As of the transaction date, the Company was unable to determine that it was probable that any of the contingent consideration would be received, and accordingly

asset was recorded for contingent consideration. Subsequent measurement of contingent consideration will be based on the guidance for gain contingencies, and any gain from contingent consideration will be recorded at the time the consideration is received.

Based on the foregoing assessment of the consideration received, the Company recorded a gain on deconsolidation of

$4,502,058

related to the sale of its membership interest in GBSLA, calculated as follows:

	As of
	November 15, 2019
Present value of promissory note	$	6,610,592
Carrying amount of non-controlling interest		8,707,651
TOTAL		15,318,243

Carrying amount of assets		14,715,798
Carrying amount of liabilities		(3,899,613	)
Net assets deconsolidated		10,816,185
GAIN ON DECONSOLIDATION	$	4,502,058

For all periods presented in the unaudited financial statements, the assets, liabilities, income, and cash flows of GBSLA have been reclassified to discontinued operations. The losses and cash flows from discontinued operations for the

three

and

nine

months ended

December 31, 2019

represent activity through the close of the sale on

November 15, 2019.